Could a loan restructure be right for you?

The lending market shifts constantly in terms of policies, trends and lender requirements. Your personal circumstances and financial situation will also very likely change over the course of your initial loan term. These changes create a great opportunity to do a mortgage health check and reassess your finances, to make sure your existing loan still satisfies your borrowing needs and remains competitive in the marketplace.

While negotiating with your current lender should always be the first port of call, there are some circumstances when a loan restructure may be the right choice.

Reasons to consider a loan restructure:

• You want to consolidate several loans (e.g. credit card, personal loan, car loan and home loan) to save money on repayments and make managing your finances simpler.
• You want to borrow against the equity in your home to renovate, invest or make another large purchase (such as a new business, a car, boat or even to pay private school fees).
• You want to fix all or part of your loan to lock in current low interest rates.
• Your fixed-rate period is expiring and your current lender won’t offer you another fixed-rate term.
• You want to take advantage of competitive rates and other incentives for new customers.
• You want access to different loan features, such as the ability to make additional repayments and redraw, an offset account, or better digital and mobile banking features.

What does the market look like so far in 2019?

The cash rate has stubbornly remained at record lows for over two and a half years, but with weaker than expected Gross Domestic Product (GDP) early this year and subsequent concerns over the economy, there is talk of a rate cut (or even two) in the near future. Even speculation of cash-rate movement can affect mortgage rates and the bargaining power of borrowers.

Already this year we have seen a significant amount of interest rate movement from lenders – both up and down. Overall, we are seeing more rate cuts for fixed rates and more rate hikes for variable rates, although this varies from one lender to the next. We are also seeing some very low rate offers and even cash-back incentives for new customers.

Of course, these external factors need to be weighed up against your own personal financial situation and longer term goals. Loan restructures do require significantly more admin and hassle than negotiating with your current lender.

If your existing loan is no longer working for you, the best bet is to discuss your circumstances with your Mortgage Choice broker. As the first step, they will contact your current lender to negotiate a more suitable loan solution. If this is unsuccessful, they can advise whether a loan restructure would be of benefit to you and if so, which lenders may be appropriate.